New Arizona Law Limits How Cities Collect Sales Taxes

Saying it makes Arizona a friendlier place to do business, Gov. Jan Brewer signed a major overhaul Tuesday of how the state and cities collect sales taxes and audit businesses to ensure compliance.

June 26, 2013

Saying it makes Arizona a friendlier place to do business, Gov. Jan Brewer signed a major overhaul Tuesday of how the state and cities collect sales taxes and audit businesses to ensure compliance.

The measure places some new limits on what cities can tax beyond what is already subject to the state sales tax. That should provide some assistance to firms that do business in several communities and now have a difficult time figuring out what products and services are subject to each city's tax.

Potentially more significant for businesses, the change eliminates the ability of each city to audit a company's books, a process that business owners say makes for multiple audits of the same transactions.

And it means that contractors who do home repairs and renovations will pay sales taxes on their supplies at the time of purchase.

That eliminates the requirement to compute and pay the levy when the project is completed. It also means contractors cannot cheat the system by buying supplies tax-free and then failing to report the sales they make.

For consumers, the most visible difference is likely to come if and when Congress approves the Marketplace Fairness Act, which would permit states to require firms that sell products on the Internet to collect the applicable sales tax. The main requirement of that federal legislation is that states have a simplified sales tax system.

This new law, which takes effect in 2015, puts Arizona into compliance and means Arizonans will start paying sales taxes on Internet purchases if Congress has acted by then on the now-stalled legislation.